Making Yourself Heard

Managing risk through the collapse of the global financial market, and maintaining the integrity of an organization’s reputation during damaging events such as food product recalls were among several issues explored by delegates attending the 33rd annual Risk and Insurance Management Society (RIMS) Canada Conference in Toronto in late September.

Managing the financial crisis

A panel of global risk managers suggested that the global financial services turmoil might produce opportunities for risk managers to have their voices heard within the upper echelons of their organizations.

Panelist Carl Leeman, chief risk officer of the Belgian company Katoen Natie Group, said there were two theories of what went wrong with the risk management in the financial institutions most negatively affected by the recent market turmoil. “The risk managers in those institutions either didn’t do their job, or they were not heard,” he said. “I think we all know that it was the second one.”

Companies surviving the turmoil will have had their wake-up call, Leeman added. “The future for risk management seems more bright than ever before, because now everyone will know that you will really need a risk manager in your company.”

RIMS president Janice Ochenkowski said she saw “a phenomenal opportunity for risk managers” arising out of the financial crisis.

The opportunity is “two-pronged,” she said. First, risk managers should do an internal assessment quickly of their organization’s risks.

Second, they should open up a dialogue with management. “Whatever level of management you are in communication with, send out some information, press releases or credit analyst reports,” Ochenkowski recommended. “Whatever is relevant to the risks you’ve identified.”

Leeman is also hopeful the financial crisis will work to change misconceptions of the role of the risk manager in an organization. He suggested that in the past, company executives might have perceived risk managers as hurdles to making money, or merely complicating ways to do business.

“These days, I think that people will really understand that what risk managers said [prior to the crisis] was not something foolish,” Leeman said. “If managers had listened, they might have fewer problems these days than they have now.”

Susan Meltzer, the 2008 RIMS Canada conference co-chair and moderator of the panel, took the opportunity to speak out against the notion that risk managers were to blame for the credit crisis and the subsequent bottom falling out of the global markets. “In echoing what Carl Leeman has said about the risk managers not being heard in the financial services industry, quite a few of the risk managers that were heard were the ones who thought the only approach to risk management was modelling and forecasting and coming up with a number at the end of the day,” she said. “Whereas, I think that our panel has eloquently talked about how being a risk manager today you have to understand globally the catastrophic impact of risk rather than just focussing purely on modelling — which is what was prevalent in the financial services.”

Integrating different philosophies

As the profession of risk management begins to include more diverse disciplines — i. e. business continuity, law, finance, etc. — how can a risk manager integrate all of those different philosophies into a single risk management approach?

A RIMS Canada Conference delegate posed the question to the panel of global risk managers noted above.

Ochenkowski replied that it depends on the organization and the manner in which the organization operates. “Is it centralized, decentralized, controlled by a single group or several business units working together?” she said. “In our company [Jones Lang LaSalle], it’s a team approach, so the heads of the technical disciplines — legal, finance, tax — are all part of the global operating committee. We work together and recognize one an-other’s expertise.”

She likened the approach to a poem by John Godfrey Saxe, ‘The Blind Men and the Elephant.’

“You get everyone looking at something from a unique perspective, but it’s only when you work together as a team that you can see the whole,” she said. “I think that, as some of the other disciplines that contribute to risk management develop more specialization, it is probably not something to reject, but to embrace it and include it in your assessment of risk within your organization.”

Empathy and managing reputation risk

Recent headlines detailing the listeria outbreak at a Maple Leaf Foods plant in Canada prompted talk at the conference of managing reputation risk in the wake of such an event.

Lorne Honickman, partner at McCague Peacock Borlack McInnis & Lloyd LLP, told delegates that when faced with a crisis endangering a company’s reputation, it is vital for the spokesperson of that organization to express empathy immediately and then stress what the organization is doing at that moment to investigate and remedy the situation.

In his presentation, ‘Risk Management and the Media: The Importance of the Crisis Communication Plan,’ Honickman walked delegates through a potential crisis akin to that of the food contamination and industrial explosion events recently appearing in Canadian headlines.

“I have always maintained the most important thing is for companies to come out immediately and to be accessible,” he told delegates. “Accept responsibility, but be very careful that you never cross over the line to admitting liability. That’s the key in strategic messaging and crisis communication.”

Getting the message right requires that the legal and risk departments be integrated in their approach, he emphasized.

Pointing to an example of an effective communications strategy, Honickman commended the approach of Michael McCain, the organization’s president and CEO, to the listeria outbreak at Maple Leaf Foods.

McCain held a press conference shortly after the outbreak and expressed sympathy for those affected, including both the ill and Maple Leaf staff (more than 23,000 people).

He then went on to explain what the organization was doing at the present time. He repeatedly used phrases such as ‘accountability,’ ‘well beyond required regulations,’ and ‘listeria is pervasive,’ in addition to other key language that demonstrated knowledge, action and credibility.

“I would suggest that this was a crisis communication plan that was created long before the crisis hit,” Honickman observed.

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“The risk managers in those institutions (affected by the financial crisis) either didn’t do their job, or they were not heard. I think we all know it was the second one.”

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When dealing with a crisis communications plan, organizations need to accept responsibility. But be very careful not to cross the line to admitting liability.